May 10, 2020 edition—Premier Oil’s block; Pemex’s natural gas flaring; and CRE’s permits.
Last Week in a Minute or Less
Electric Power & Renewables. IEnova is doing well in 2021; AMDEE said Mexico will not reach its renewables goal; and Moody’s maintained CFE’s rating.
Natural Gas Mid-Downstream & LNG. The Hydrocarbons Law will hit the natural gas sector; and Mexico’s natural gas market returns to normal prices.
Liquid Fuels Mid-Downstream. A gas station permit is questioned; the Hydrocarbons Law was published, and legal action started; and the CRE continues delaying permits.
Oil & Gas Upstream. Premier Oil will explore its second block; Pemex’s natural gas flaring increased; and the Hydrocarbons Law will hit the oil sector.
Government & NGO. Inflation is expected to reach 4.58% in 2021; USMCA talks are expected to be “frank and honest”; and Mexico’s GDP went up in the first quarter of 2021.
Déjà vu all over again. Last week’s readers were particularly interested in GENSA’s new job (El Financiero – Spanish); Enel’s new wind park (El Economista – Spanish); and US gas exports (Platts – English).
Geopolitics & Trade
USMCA labor rights need enforcing in Matamoros. Tridonex workers at Matamoros factories are demanding labor rights as the union has allegedly failed to fight for them (WTVBAM – English). Under USMCA, companies failing to ensure freedom of association for workers in Mexico could be sanctioned.
USMCA talks are expected to be “frank and honest.” US trade representative Katherine Tai expects the first meeting of the USMCA talks will include “frank and honest” discussions regarding the implementation of the agreement (El Economista – Spanish). The meeting will be attended by the trade ministers of Mexico, Canada, and the US.
Canada took Mexico’s place as the US’ major trade partner. Mexico became the second US trade partner, behind Canada, with a total value of US$33.3bn in March, a 10.9% interannual increase (El Economista – Spanish). Mexico exports manufactured products while Canada is strong in energy products.
Moody’s maintained Mexico’s rating. The international rating agency kept Mexico’s rating at Baa1 with a negative outlook (Proceso – Spanish). Fiscal strength maintains the rating as well as the growth expected after the COVID-19 pandemic passes (El Economista – Spanish).
Inflation is expected to reach 4.58% in 2021. The average forecast for 2021 inflation is expected around 4.58%, the highest in a year among the experts consulted (El Economista – Spanish). The forecast is again outside Banxico’s goal, which is 3% plus or minus 1 percentage point.
CFE’s debt went up 20% in the first quarter of 2021… The state-owned company’s debt increased by 20% compared to the last quarter of 2020 to MXN72bn (El Financiero – Spanish). The natural gas crisis caused a loss of MXN35bn for CFE (El Economista – Spanish).
…and Pemex lost less in the first quarter. The state-owned company reported a net loss of MXN37.36bn for the first quarter, against MXN562.25bn in the same period of 2020 (RFI – English) (El Financiero – Spanish). Pemex’s production remains stable at 1.75 million barrels per day.
Mexico’s GDP went up in the first quarter of 2021. The Mexican economy grew 0.4% in the first quarter of 2021, compared to the last quarter of 2020 (Proceso – Spanish). The GDP went down 2.9% in its annual comparison.
Legal & Regulatory
The Sener pays big for Pemex. The help given to the state-owned company in the first quarter of the year made the Energy Ministry’s expenses shoot up (El Economista – Spanish). In the first three months, the Sener spent MXN64.06bn, a 213% increase compared to the same period in 2020.
The Hydrocarbons Law will hit the natural gas sector… According to a WoodMac expert, the modifications brought by the Hydrocarbons Law would impact Mexico’s natural gas sector “from exploration and production to midstream to downstream operations” (Natural Gas Intel – English).
…and the oil sector will suffer a blow too. According to experts, the companies that develop oil exploration and production activities could be affected by the Hydrocarbons Law, which could cancel fuel distribution and storage permits (Reforma – Spanish).
The Hydrocarbons Law was published and legal action started. After the publication of the Hydrocarbons Law (DOF – Spanish), the National Organization of Fuel Retailers, which includes 43 gas station owners associations, asked for changes in the rules, while companies launched legal action to stop the new law (El Economista – Spanish).
The CRE continues delaying permits. During the past six months, the Energy Regulatory Commission (CRE) has not granted generation permits for the private sector and has 95 pending requests (Reforma – Spanish).
The CRE modified the rules for electricity measuring systems. The Energy Regulatory Commission (CRE) modified the articles regarding measuring systems for electricity use and how, after January 1, 2023, only certain measuring systems could be installed (DOF – Spanish). Distributors would have to be sure that measuring systems before that date follow the exact values.
The Finance Ministry expects to spend MXN42bn in gasoline tax stimulus. According to the Finance Ministry, the tax stimulus for gasoline will cost MXN41.9bn by the end of the year (El Economista – Spanish). In the first quarter, MXN1bn have been handed out for the stimulus.
Pemex’s natural gas flaring increased. The state-owned company reported an increase in the flaring and venting of natural gas in the first quarter (Natural Gas Intel – English). Only 85% of the natural gas Pemex produced ended up in the market in the first quarter.
Mexico’s natural gas market returns to normal prices. Mexico’s natural gas prices dropped to US$3.61 MMBtu in March after the hike to US$21.37 MMBtu in February (Natural Gas Intel – English). Volumes in March rose to 6.602 Bcf/d compared to the February demand of 5.54 Bcf/d and 5.572 Bcf/d last March.
Moody’s maintained CFE’s rating. The international rating agency kept the state-owned company’s rating at Baa1 with a negative outlook (Proceso – Spanish). The decision is a response to the uncertainty regarding CFE’s finances, and it considered the government’s support.
Strategy & Operations
A gas station permit is questioned. The Energy Regulatory Commission (CRE) approved a permit for gas station services to Era Tech Combustibles, despite the supposed relationship between one of the investors and the Sinaloa Cartel (Reforma – Spanish).
Premier Oil will explore its second block. The National Hydrocarbons Commission (CNH) approved Premier Oil’s permit to increase exploration activities at a second block in the Gulf of Mexico (Platts – English). The CNH okayed the modifications in its exploration plans to explore the Mesozoic formations in the block.
IEnova is doing well in 2021. IEnova is continuing to work on development projects to improve Mexico’s energy security. It started operations on its Border Solar project and completed the acquisition of the remaining 50% equity interest in Energía Sierra Juárez (PR Newswire – English). Sempra Energy launched its exchange offer to acquire all the outstanding shares of IEnova.
AMDEE said Mexico will not reach its renewables goal. The Mexican Association of Wind Energy (AMDEE) believes Mexico will not reach its goal of 35% renewable energy generation by 2024 (Forbes – Spanish). The CRE is not approving permits and the lack of investment in transmission makes it impossible.
Old School Social Goes Viral
(Editor’s note: For the duration of the COVID-19 outbreak, this section will refocus on announcements of event delays or cancellations, events that are moved online, and scheduled webinars and public conference calls. Stay safe!)
30th La Jolla Energy Virtual Conference will be held on Wednesdays and Fridays throughout May, 2021.
Mexico Assembly is rescheduled for May 26-27, 2021, at Hyatt Regency, in Mexico City.
The Mexican Petroleum Congress is rescheduled for June 23-26, 2021, in Monterrey.
Mexico’s remittances skyrocketed. In the first quarter of 2021, Mexican workers abroad sent US$10.6bn home (El Economista – Spanish). The IMF expects remittances to continue strong but may slow down as the COVID-19 pandemic desists.
Quote of the Week
“La dedicación de las ciencias, las letras y las artes, participa de cierta condición de heroísmo y es levadura del saber, la sensibilidad y la conciencia del pueblo.”
“The dedication of sciences, literature, and arts takes part of certain heroism and it is the leavening of the wisdom, sensibility, and awareness of the people.”
– Agustín Yáñez (1904-1980), Mexican writer and politician.
We hope you have a productive week. Please send any news, comments, or COVID-19 recovery strategies to MexicoWeekly@energynarrative.com.
Tell your friends and colleagues about the Weekly Brief! They can sign up for a free one-month trial here.[/vc_column_text][/vc_column][/vc_row]